Crossposted from Curious Capitalist
You can practically set your watch by it. As petroleum prices soar—and with them, oil company profits and pain at the gas pump—sooner or later members of Congress will haul Big Oil executives into a hearing and Demand That Something Be Done. It happened in 2008, the last time oil prices breached the $100 a barrel mark, and on Thursday morning it happened again, with five CEOs from the major oil companies called in for questioning before the Senate Committee on Finance.
The hearings unfolded pretty much as you’d expect. The Democrats on the committee pointed to the $35 billion in earnings recorded by the big five oil companies in the first quarter of 2011 and wondered why they needed that extra $4 billion or so in taxpayer subsidies. The Republicans on the committee attacked the Democrats for attacking the oil companies, claiming that any reduction in subsidies amounted to a tax increase, which would mean even higher prices at the pump. And the oil company executives took a break from swimming in their money bin and absorbed the criticism for a few hours, confident in the knowledge that once the hearing were done, they’d go back to selling the one substance America has proven time and time again that it cannot live without, however much we complain. You don’t have to be a Texas wildcatter to find some sympathy with Republican Senator Orrin Hatch, who said:
This hearing should not be used to score cheap political points. Let’s send the pony back to the stable… Let’s send the dog back to the kennel.
Just in case the audience wasn’t clear what Senator Hatch meant by this phrase, he displayed a large photo of a dog sitting on a pony to underscore his point. Not to be outdone, Democratic Senator Charles Schumer returned serve with this riposte:
You’d have an easier time convincing the American people that a unicorn just flew into this hearing room than that these big oil companies need taxpayer subsides, that’s the real fairy tale.
And that prompted Republican Senator Pat Roberts to reply:
It’s very difficult to follow the unicorn from New York, who has very sharp horns. Are you all right over there?… Sometimes a unicorn can sort of morph into a rhinoceros and you don’t wanna mess with a rhinoceros.
Obviously, the U.S. Senate remains the world’s greatest deliberative body.
But while it’s easy to mock the oil hearings as political theater—mostly because it’s true—there are some kernels of actual policy that can be found underfoot. First, the argument put forward by the oil companies and many of the Republicans that removing subsidies for the industry would lead to a real spike in gas prices is mostly untrue—as Nicholas Kusnetz of ProPublica reported today, cutting those subsidies isn’t likely to have much impact on gas prices either way. It’s also worth noting, while we’re at it, that the domestic oil industry in the U.S. is actually doing better now than it has in years, with production up 10% over the last two years and more wells drilled in 2010 than any year since 1985.
Still, the realities of a lingering weak economy and panic over government debt means that this time, there might actually be a shot of trimming back oil subsidies. House Speaker John Boehner let slip in a recent interview that he might be in favor of cutting some oil subsidies, though his audience quickly walked the sentiment back. But in a time of belt-tightening—and sky-high oil profits—both parties might be willing to trim some of that aid, although they’re not likely to agree on where it should go. Democratic Senator Max Baucus wants any cuts to go to renewable energy:
Even without these tax breaks, these companies would clearly be highly profitable. We can put this money to better use and we should.
Baucus is right there—as long as we remain addicted to crude, oil companies should be able to count on those profits. The only way we’ll change that essential math is by moving away from fossil fuels—and shifting some of that money from dirty fuel to clean fuel would be a good start. And even better, it might keep us from needing to have another one of these ridiculous hearings.